Plain language law

New Zealand law explained for everyone

Income Tax Act 2007

Recharacterisation of certain transactions - Consolidated groups of companies - Eligibility and restrictions

FM 31: Eligibility rules

You could also call this:

“Rules for companies joining or staying in a consolidated group”

You can form, join, or stay in a consolidated group if your company meets these rules:

You must live in New Zealand. Your company can’t only make money that’s free from tax, except for some kinds of income from owning parts of other companies. You need to be set up in New Zealand or doing business here through a fixed place.

Your company has to be fully owned by the same group as the other companies in the consolidated group. There are some other rules you might need to follow too.

If your company is a special type, like a qualifying company or a mineral mining company, all the other companies in the group must be the same type.

If your company uses a different financial year than most companies, all the other companies in the group must use the same different financial year.

You can’t be part of a consolidated group if someone has changed how your company’s shares work just to let you join the group and avoid the rules. This includes any tricks with your shares or the rights that come with them.

Some older companies might not have to follow all these rules to join or stay in a consolidated group.

This text is automatically generated. It might be out of date or be missing some parts. Find out more about how we do this.

View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM1516715.

Topics:
Money and consumer rights > Taxes
Business > Industry rules
Previous

FM 30: Application of certain provisions to consolidated groups, or

“Rules for tax refunds when company groups merge”

Next

FM 32: Restriction on membership of consolidated groups, or

“Companies can only be part of one consolidated tax group at a time”

Part F Recharacterisation of certain transactions
Consolidated groups of companies: Eligibility and restrictions

FM 31Eligibility rules

  1. A company is eligible to form, join, and continue as part of a consolidated group at a particular time if, at the time,—

  2. it is resident in New Zealand; and
      1. it is not a company that derives only exempt income, except exempt income under sections CW 9 and CW 10 (which relate to income from equity); and
        1. it is incorporated in New Zealand or carrying on a business in New Zealand through a fixed establishment; and
            1. it is a member of the same wholly-owned group of companies as the other members of the consolidated group; and
              1. when subsection (2) or (4) applies, it meets the relevant conditions; and
                1. subsection (6) does not apply to it.

                  1. Despite subsection (1), if a company that is part of a consolidated group is 1 of the following types of company, all companies in the consolidated group at the time must be the same type as that company:

                  2. a qualifying company:
                    1. a mineral miner that is a company.

                      1. The requirements of subsection (1)(d) and (e) do not apply to determine whether a grandparented consolidated company—

                      2. is eligible to form or join a consolidated group:
                        1. continues as part of the consolidated group.

                          1. Despite subsection (1), if a company that is part of a consolidated group has a non-standard balance date, all companies in the consolidated group at the time must have the same non-standard balance date.

                          2. Repealed

                          3. A company is not eligible to be part of a consolidated group if, for a purpose of enabling a company to be part of a consolidated group so as to defeat the intent and application of the consolidation rules, the company’s shares—

                          4. are subject to an arrangement, or to a series of related or connected arrangements; or
                            1. have rights attaching to them extinguished or altered directly or indirectly by any means.

                              Compare
                              Notes
                              • Section FM 31(1): substituted (with effect on 1 April 2008), on , by section 232(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
                              • Section FM 31(1)(b): repealed (with effect on 15 March 2017), on , by section 70(1) of the Taxation (Annual Rates for 2022–23, Platform Economy, and Remedial Matters) Act 2023 (2023 No 5).
                              • Section FM 31(1)(c): amended (with effect on 1 July 2011 and applying for income years beginning on or after that date), on , by section 67(1) of the Taxation (International Investment and Remedial Matters) Act 2012 (2012 No 34).
                              • Section FM 31(1)(e): repealed (with effect on 15 March 2017), on , by section 70(1) of the Taxation (Annual Rates for 2022–23, Platform Economy, and Remedial Matters) Act 2023 (2023 No 5).
                              • Section FM 31(1)(eb): inserted (with effect on 1 April 2008 and applying for the 2008–09 and later income years), on , by section 72(1) of the Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Act 2014 (2014 No 4).
                              • Section FM 31(1)(g): amended, on , by section 56 of the Taxation (Livestock Valuation, Assets Expenditure, and Remedial Matters) Act 2013 (2013 No 52).
                              • Section FM 31(2)(b): replaced, on , by section 72(2) of the Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Act 2014 (2014 No 4).
                              • Section FM 31(3): substituted (with effect on 1 April 2008), on , by section 232(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
                              • Section FM 31(5) heading: repealed, on , pursuant to section 172 of the Taxation (Livestock Valuation, Assets Expenditure, and Remedial Matters) Act 2013 (2013 No 52).
                              • Section FM 31(5): repealed, on , by section 172 of the Taxation (Livestock Valuation, Assets Expenditure, and Remedial Matters) Act 2013 (2013 No 52).
                              • Section FM 31 list of defined terms foreign company: repealed (with effect on 15 March 2017), on , by section 70(2) of the Taxation (Annual Rates for 2022–23, Platform Economy, and Remedial Matters) Act 2023 (2023 No 5).
                              • Section FM 31 list of defined terms income tax: repealed (with effect on 15 March 2017), on , by section 70(2) of the Taxation (Annual Rates for 2022–23, Platform Economy, and Remedial Matters) Act 2023 (2023 No 5).
                              • Section FM 31 list of defined terms LAQC: repealed, on , by section 172 of the Taxation (Livestock Valuation, Assets Expenditure, and Remedial Matters) Act 2013 (2013 No 52).
                              • Section FM 31 list of defined terms mineral miner: inserted, on , by section 72(3)(a) of the Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Act 2014 (2014 No 4).
                              • Section FM 31 list of defined terms mining company: repealed, on , by section 72(3)(b) of the Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Act 2014 (2014 No 4).
                              • Section FM 31 list of defined terms wholly-owned group of companies: inserted (with effect on 1 April 2008), on , by section 72(4) of the Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Act 2014 (2014 No 4).